It's hard to make a case that
watching the news will help you trade stocks better. Consider
the best day and the worst day in stock market history. Using
technical analysis, especially
Tiger's Accumulation Index and the major Buys and Sells of Peerless
will probably help a lot more.
Biggest Up-Day in Stock Market History
It is interesting how bullish it is when the market goes up
on bleak news. Here is what
the DJI looked like at the market's bottom in July 1932 and re-test of
those lows. The DJI
had fallen from 380 to 42, between 1929 and 1932. The largest
single day gain ever
was +15.34% on March 15th. 1933. See how the high volume
breakaway gap would
have told the attentive technician the trend had changed. (No advance
and decline data exists
for this period, so we can not show normal Peerless automatic Buys and
Sells as they now
What was the background?
Would reading the newspaper have told you to buy?
Congress had in February repealed Prohibition. "Demon Rum"
was loose. Franklin Roosevelt
was inaugurated on Match 4th and promptly proclaimed a 10-day Bank holiday
saying "We have
nothing to fear but fear itself." On March 7th, the game of
"Monopoly" was invented.
The Civilian Conservation Corp began operations with tree conservation at
Meanwhile, Hitler was establishing a Nazi dictatorship. On January
29th, Hitler become
Chancellor of Germany and promised a "parliamentary democracy" and
the German Parliament. Goring then banned Communist meetings and
A few days later, he banned the most important social-democratic
newspaper. The aging
German President Von Hindenburg limited freedom of the press. Catholic
Prussia were prohibited. The SA/SS-"Police" were formed and quickly
killed 50 protestors.
The Nazis burn the Rechstag and blame the Communists. On March 15th,
Goring had a German Cabinet meeting in which they discussed how
to complete the process
of establishing a Nazi dictatorship by getting the Parliament to pass
an Enabling Act
which would give Hitler the power to destroy State government
independence as well as
make all laws and treaties and control the budget without bothering
with legislative hearings
or votes. On March 23rd, the German Parliament grants Hitler
dictatorial powers. In
April, the first anti-Jewish "laws" go into effect. and the
Nazis stage public book burnings. .
The largest one-day percentage drop since 1914
occurred on October
19, 1987, when the
DJIA fell 22.61%. This was a Monday.
After a very weak Friday, Mondays often are
dominated by climactic emotional selling. We were short then.
Our Peerless system had given
its fourth major S9 signal of the year in early October. Many
Tiger customers made thousands and
thousands of dollars in this period with put options.
Biggest Down Day in Market History
the background? Would reading the newspaper have told you to sell before
the decline and buy on the extreme weakness of this day?
Here was the news background.
I can see nothing here that could remotely explain the
market's extreme negative volatility.
August 2, 1987 - U.S.S.R. performs nuclear
test at Eastern Kazakh/Semipalitinsk U.S.S.R.
August 7, 1987 - 5 Central American presidents sign
peace accord in Guatemala
August 16, 1987 - Astrological Harmonic Convergence - Dawn of New
August 27, 1987 - Dow Jones Industrial Avg closes above
2,700 for 1st time (2,700.57)
It peaks on August 25th at 2722,42
September 1, 1987 - Smoking forbidden in public buildings in
September 18, 1987 - U.S.S.R. performs
nuclear test at Eastern Kazakh/Semipalitinsk U.S.S.R.
September 24, 1987 - U.S. performs nuclear test at Nevada Test
clue of market vulnerability was the way the Federal Reserve had started to
tighten money in from February 1987 to September 1987. The Fed
Funds' rate rose sharply
in the Summer of 1987.
09/1987, 7.22 Up 1.12% in 7 months.
(You can see these statistics at http://www.federalreserve.gov/releases/h15/data/Monthly/H15_FF_O.txt
The Crash of 1987 Was An Artificial System Failure
In 1987, the rising tide of short-term interest
rates accenuated the move by some big funds to use the
Futures market and Index options to hedge
their positions. Many feel the "tail wagged the dog",
namely that it was the rush to go short the
thinner Futures market using computerized trading that caused
the extreme declines. Large baskets of
stocks were sold this way, owing purely to general market conditions.
The evidence is strong that it was the breaking
of the DJI-30's 200-day moving averaged on Friday,.
with the DJI still 700 points up off the final
bottom, that started this rush to by insurance in the
form of put options and being short the S%P
When individuals heard of the massive declines,
some rushed to sell. So many market orders
came in that the computers could no longer
report the last trade. As a result, many who panicked
got prices much lower than they expected.
There were no "circuit breakers" to give the computers
a chance to catch up in their reporting and
give everyone a chance to think more cooly. When,
finally after the close, it was revealed
how much lower many individual stocks' prices had fallen,
there was a rush to buy at the next day's
opening. Overnight, the Fed told Big Wall Street traders
and institutions that they would provide all
the liquidity needed to avert a financial collapse. They wanted
to share prices to quickly rise so that big
specialist firms and brokerages would not collapse. The
Fed guaranteed, in effect, their solvency.
With the backing of the Fed, the market turned back upwards.
Hence the phrase, "Don't fight the
Fed". The world-wide markets were all affected similarly, showing
the dangers, too, of such linkage and instant
Want more reading. Look at
Individual Stocks in 1987 Did Show Bearish Signs Before Crashing
Here is what Apple looked like three weeks before the
Crash. To most
observers the stock
looked great. Not to Tiger user; the Tiger Accumulation Index
remained negative despite its gaining
nearly 200h% in the previous year. Its OBV was also not
confirming its run to new highs. This meant
informed Big Money Insiders were selling heavily and the public
was running out of money to
buy the stock aggressively.
Look at what happened after the beginning of October 1987 with
AAPL's stock. In
three weeks Apple lost 50% of its value.
What does Apple's Stock Look Like Now?
news is good. The stock seems to be starting another run.
Why would anyone want to sell?
But someone is. Tiger's
Accumulation Index is nearly
negative. And aggressive public buyers
are not boosting the OBV Line to
levels that correspond to the new highs
by the price of the stock.
> Just as in October 1987, AAPL showed a new high with its
Accumulation negative or nearly so,
despite the new high.
> Just as in October 1987,
AAPL's OBV Line was not confirming
the new high.
> Unlike in 1987, AAPL's stock had only doubled, not tripled in the
> ??? - Sell S9... Now would be
a good time to get Peerless Stock Market
Here are the Comments of a Floor Trader who observed
Zarlenga, Director of American Monetary Institute - http://www.monetary.org
Here are some
"At varrious stages of the panic, Partners from the major NYSE member firms
came down into the futures trading room, looking like death, to check on their agents.
I remarked to X, who represented the largest of them that theyd do better to stay in
their offices, rather than display that much evident fear."
"During the day on Monday the NYFE pit got thinner and thinner as floor traders
either got smashed, scared, or had their trading badges revoked by representatives
of the clearing houses, who came to the floor to pull out traders they had previously
guaranteed. All traders without years of experience were summarily removed. Without a
clearing house guarantee they had to stop trading."
"Others were allowed to continue trading only for liquidation; to make
would liquidate their existing positions. One out-trade (mistaken trade not
by the opposing trader) could be devastating under such conditions, where the traders were
expected to split the loss (or profit) involved in the disputed trade. They were usually
because if it was profitable, the opposing brokers trade checker was usually sharp enough
to accept it as valid, especially if he heard no other trade checker in the trade checking
room calling for the trade as one of theirs....
"One thing that the 1987 crash made very clear was
was no real
liquidity in the markets, when it was needed. Virtually all
managers tried to do the same thing at the same time: to sell
stock index futures, in a futile attempt to hedge their stock
after the crash,
maximum daily trading limits and circuit breakers
by the Stock exchanges; a solution which the agricultural
commodities markets had used successfully for decades. These
limits were a good
"This whole experience was very instructive and helpful to me, in accelerating
my dropping an
ideological commitment to laissez Faire free markets.
Life became more
complex - I no longer had the simple one theory fits
situations formula suggested by Ayn Rands novels!...
trading limits were imposed, an article by a free market ideologue
participants for compromising the free unrestricted market
under to government in establishing the trading limits!"